On 3 November 2003 by wenY1J0

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									                  IN THE HIGH COURT OF SOUTH AFRICA
                    (TRANSVAAL PROVINCIAL DIVISION)

                                                    DATE: 16/5/2006
                                                   CASE NO: 20905/2003 and
                                                                 16876/2005



In the matter between:



TERSIA MATILDA ELS                                                   Applicant


and


AGRI KORPORASIE BEPERK                                         1st Respondent

PIERRE DE VILLIERS BERRANGE N.O.                               2nd Respondent

MIRIAM OLIVERA ADRIANA VERMEULEN                               3rd Respondent

MEESTER VAN DIE HOOGGEREGSHOF (T.P.A.)                         4th Respondent

LAEVELD KORPORATIEWE BELEGGINGS BEPERK                         5th Respondent



________________________________________________________________

                                JUDGEMENT

________________________________________________________________



MURPHY J



1.    This judgement deals with two applications.      The first concerns an

      application for the rescission of three orders under case number 20905/03
                                       2


     brought by Tersia Matilda Els (“the applicant”) against Afgri Koöperasie

     Bpk (“the first respondent”) who sought and obtained a final sequestration

     order against the applicant on 18 May 2004. The first respondent was

     previously known as Natalse Landbou Koöperasie Bpk. The second and

     third respondents are the trustees of the applicant’s insolvent estate. The

     fourth respondent is the Master of the High Court. Initially only the first

     respondent     opposed    the    application   for   rescission.   However,

     subsequently Laeveld Korporatiewe Beleggings Beperk (“the intervening

     creditor”) sought and obtained leave to intervene in the rescission

     application. In addition, the intervening creditor has brought a second

     application for sequestration of the applicant under case number

     16876/2005, such application to be determined in the event of rescission

     being granted in respect of the orders granted in April and May 2004. For

     the sake of convenience, and to avoid confusion, I will refer to the key role

     players throughout as the applicant, the first respondent and the

     intervening creditor.



2.   During June 2003 the first respondent launched an urgent application for

     the sequestration of the applicant and her husband to whom she was then

     married in community of property. The application was opposed by the

     applicant and her husband. The first respondent also sought an alternative

     order that the applicant’s husband, Conraad Els, be held personally liable
                                        3


     as sole member for the debts of D & F Chemicals CC in terms of section

     64 of the Close Corporations Act 69 of 1984.



3.   The application for sequestration was predicated upon a claim by the first

     respondent for an amount of approximately R9 million owing in respect of

     agricultural chemicals and fertilisers supplied to the joint estate or to D & F

     Chemicals CC. The applicant alleged an element of wrongful collusion

     on the part of Conraad Els, D & F Chemicals CC and one Hugo

     Steenkamp, an erstwhile employee of the first respondent, in relation to

     the pricing of the goods sold and delivered, in particular that the goods

     were sold below their market price to the substantial detriment of the first

     respondent.    It was alleged that the applicant and her husband were

     personally liable for such debts, that such exceeded the value of their net

     assets and that accordingly the joint estate was in fact insolvent. The

     applicant and her husband opposed the sequestration application on

     various grounds, essentially denying liability for the debts of the close

     corporation or any collusion with Steenkamp in acquiring the goods at a

     price substantially below the market price.



4.   When the matter was enrolled on 9 September 2003, Bertelsmann J

     referred it to trial allowing the notice of motion and the opposing papers to

     stand as the summons and notice of intention to defend respectively and

     affording the first respondent an opportunity to file a declaration within the
                                       4


     ordinary time period permitted in terms of the rules. His reasons for so

     doing appear to have been the existence of factual disputes in relation

     to the first respondent’s locus standi, the alleged claim and the question of

     whether the joint estate of the applicant and her husband was indeed

     insolvent. There was also a question raised about the joinder of D & F

     Chemicals CC.



5.   On 3 October 2003 the first respondent filed its declaration.       In terms

     thereof it sought judgement against the applicant and her husband jointly

     and severally for payment of the amount of R8 934 975,95 together with

     interest a tempore morae, and an order provisionally sequestrating the

     joint estate of the applicant and her husband. Neither the applicant nor

     her husband filed a plea in the time period prescribed by the rules.

     Accordingly, on 12 December 2003 the first respondent’s attorneys served

     a notice of bar upon Werner Prinsloo Attorneys (“Prinsloo”) who had been

     instructed by the applicant’s husband in the sequestration proceedings.



6.   On the same day, 12 December 2003, unbeknown to the first respondent

     or its attorneys and without the judge granting the order being informed of

     the insolvency proceedings, this court issued a decree of divorce

     dissolving the bonds of marriage between the applicant and her husband.
                                           5


7.   In the period between the filing of the declaration and the divorce it is

     evident that attempts were made, though it would seem not too

     conscientiously, to find a settlement to the dispute. On 3 November 2003,

     Prinsloo addressed a letter to the first respondent’s attorneys which read:



           “Ons verwys na u faks van 31 laaslede en het wel die moontlikheid van ‘n

           skikking met kliënt bespreek.



           Kliënt is egter op hierdie oomblik nie in ‘n posisie om ‘n skikkingsvoorstel te maak

           nie, maar sou die posisie verander sal ons u onmiddellik in kennis stel.



           Ten opsigte van u deklerasie het ons dit aan Advokaat oorhandig en is ons tans

           besig met die voorbereiding van ons pleit. Dit behoort eersdaags op u beteken

           te word.”




8.   As the plea was not filed this obviously led to the notice of bar on 12

     December 2003. Despite this, Prinsloo addressed another letter to the

     first respondent’s attorneys on 9 February 2004 which read:



           “Ons verwys na die telefoongesprek tussen skrywer en u mnr Scheepers op 4

           deser asook u daaropvolgende skrywe.



           Na aanleiding van die gesprek bevestig ons dat ons verweerskrif reeds beteken

           moes word na aanleiding van u kennisgewing van belet.           Soos egter aan u

           verduidelik is ons kliënt se toekoms en veral die Beslote Korporasie se toekoms
                                            6

            tans in die weegskaal en wil ons nie nou onnodige verdere regskoste aan die

            voorbereiding van ‘n verweerskrif spandeer nie.

            Ons kliënt besit nie oor die fondse wat u kliënt van mening is hy moet hê nie en

            raap en skraap hy werklik om maandeliks sy uitgawes te vereffen.



            Onder die omstandighede versoek ons u vriendelik om die liassering van ons

            verweerskrif oor te hou tot uitdruklike instruksies van u kliënt veral gesien in die

            lig van u kliënt se eie beoogde oorname. Onder die omstandighede wil ons,

            sonder dat ons instruksies daartoe ontvang het, aan die hand doen dat die aksie

            geskik word op die basis dat u kliënt sy eis terugtrek en elke party sy eie koste

            betaal.



            Ons verneem eersdaags van u.”




9.    The first respondent’s attorneys replied to this letter the next day, 10

      February 2004, as follows:



                                                    th
            “Thank you for your facsimile of the 9 instant. We will refer same to client for

            instructions but must point out that we do not think our client will be agreeable to

            settle the matter on the basis that plaintiff withdraws its claim and each party

            pays its own costs. We will however revert upon receipt of instructions.”



10.   The applicant claims that this correspondence reflected an oral agreement

      or understanding that the action would be held over until the first

      respondent gave further instructions to proceed.               The first respondent
                                                    7


      denies this and annexed to its answering affidavit a letter addressed by its

      attorneys to Prinsloo dated 4 February 2004 which read:



              “Telecon between writer and yourself on even date refers. We confirm that we
                                                                    th
              will hold the matter in abeyance until Wednesday 11        February 2004 pending

              your written requests for an indulgement which of course will have to be referred

              to client for further instructions.



              Trusting you find the above in order.”



11.   On 1 April 2004 the first respondent’s attorneys served an application for

      default judgement on Prinsloo setting the application down for 6 April

      2004.    This prompted telephonic discussions between the attorneys in

      terms of which it was agreed to remove the application from the roll for 6

      April 2004 and to reinstate it on 13 April 2004.



12.   In a letter dated 7 April 2004 addressed to the first respondent’s attorneys

      in Pietermaritzburg, which the fax transmission slip reveals only

      reached them on 13 April 2004 at 10h42, Prinsloo stated as follows:



              “Ons verwys na u skrywe van 10 Februarie 2004 asook die voorafgaande

              telefoniese gesprekke tussen skrywer en u mnr Scheepers.



              Tydens die telefoongesprekke en in die skriftelike dokumentasie wat daarop volg,

              het ons met u mnr Scheepers ooreengekom dat die liassering van ons

              verweerskrif oorgehou word hangende verdere instruksies van u kliënt en dat u
                                   8

  ons vroegtydig skriftelik in kennis sal stel indien u kliënt vereis dat die

  aangeleentheid moet voortgaan en ons verweerskrif geliasseer moet word.



  Tot op datum het ons nie van u verneem dat die verweerskrif verlang word nie en

  het ons aanvaar dat u kliënt die voortsetting van die aksie steeds oorweeg. Ons

  kliënt is          geensins bereid om in te stem dat verstekvonnis teen hom

geneem word nie en is       steeds van voorneme om die aksie te verdedig. Bloot uit

‘n koste oogpunt was skrywer       en u mnr Scheepers dit eens dat die voortsetting

van hierdie aksie moontlik nie in ons      onderskeie kliënte se belang is nie en

slegs onnodige regskostes tot gevolg mag hë.



  Intussen het ons ‘n aansoek om verstekvonnis van u plaaslike korrespondente

  ontvang waarin die aangeleentheid geplaas word vir aanhoring op Dinsdag 13

  April 2004. Ons is van mening dat hierdie optrede instryd is met die bestaande

  ooreenkoms en versoek u vriendelik om die aansoek om verstekvonnis van die

  rol te verwyder.



  Ons verneem dat mnr Scheepers nie meer by u werksaam is nie en dat die

  aangeleentheid nou deur u mnr Liebetrau hanteer word. Skrywer het reeds twee

  telefoniese boodskappe by u kantoor gelaat en sal graag die voortsetting van

  hierdie aangeleentheid met u mnr Liebetrau wil bespreek voordat verdere

  pleitstukke verwissel word.



  Ons verneem dringend van u.”
                                            9


13.   On the same morning, one assumes around about the same time as the

      fax reached Pietermaritzburg, here in Pretoria, van der Merwe J handed

      down an order in the following terms:



            “Na aanhoor van die advokaat namens die eiser, word die volgende bevel by

            verstek teen die verweerders verleen ten gunste van die eiser:



           A.       Teen die eerste verweerder:

            1       ‘n Bevel ingevolge waarvan verklaar word dat die eerste verweerder

                    persoonlik teenoor die eiser aanspreeklik is vir:



                    1.1     Betaling van die bedrag van R8 934 975,95,



                    1.2     Rente op die bedrag van R8 934 975,95 teen die wetlike

                            voorgeskrewe koers a tempore morae vanaf die datums waarop

                            elke chemikaliese produk, vier ‘slashers” en kunsmis deur die

                            eiser aan         die vennootskap bekend as D&F Chemicals,

                    alternatiewelik aan D&F          Chemicals BK (Registrasienommer: CK

                    99/45027/23) gelewer is maar     nie betaal is nie, tot datum van betaling.



            B.      Teen die eerste en tweede verweerders gesamentlik en afsonderlik,

                    die een betalende die ander kwytgeskeld te word



            1       Betaling van die bedrag van R8 934, 95



            2       Rente op die bedrag van R8 934 975, 95 teen die wetlik voorgeskrewe

            koers a tempore morae vanaf die datums waarop elke chemikaliese produk, vier

                    “slashers” en kunsmis deur die eiser aan die vennootskap bekend as
                                           10

            D&F     Chemicals, alternatiewelik aan D&F Chemicals BK (Registrasienommer:

            CK      99/45027/23) gelewer is maar nie betaal is nie, tot datum van betaling;



            3       Koste van die geding op die basis soos tussen prokureur-en-eie-kliënt.



          C.        Teen die eerste en tweede verweerders:



            1       Die gesamentlike boedel van die verweerders, te wete Coenraad

                    Frederick Els en Tertia Matilda Els, word hiermee onder voorlopige

                    sekwestrasie geplaas in die hande van die meester van die hof en ‘n

            bevel nisi      word uitgereik wat die verweerders oproep om redes, indien

            enige, voor hierdie     hof aan te voer om 10:00 op 18 Mei 2004 waarom:



                    1.1     ’n finale bevel van sekwestrasie nie teen hulle boedel gemaak

                            moet    word nie;



                    1.2     koste van die aansoek om sekwestrasie nie koste in die

                            sekwestrasie moet wees nie.



            2       Die bevel in paragraaf C1 moet onverwyld in die Staatskoerant en Beeld

                    gepubliseer word;



            3       Kennisgewing van die bevel in paragraaf C1 moet aan alle bekende

                    skuldeisers en die Ontvanger van Inkomste per aangetekende pos

                    geskied.”



14.   For reasons unknown, Prinsloo appears not to have instructed counsel to

      appear in the default judgement proceedings or to have arranged for the
                                              11


      letter dated 7 April 2004 to be handed into court. On 20 April 2004 the

      first respondent’s attorneys addressed a letter to Prinsloo setting out their

      client’s position regarding the alleged agreement not to proceed. It reads:



              Die vorige korrespondensie wat tussen ons onderskeie kantore gevoer was

              spreek vir sigself. U het ‘n vergunning gevra vir liassering van die verweerskrif

              en voorgestel dat die aksie geskik word op die basis dat ons kliënt se eis

              teruggetrek word en elke party eie kose betaal. Hierop atwoord ons dat ons, ons

              kliënt se instruksies sal neem maar nie glo dat ons kliënt tevinde sal wees vir

              skikking soos voorgestel nie.



              Dit is tog duidelik dat daar geen vergunning verleen was vir liassering van u

              kliënt se verweerskrif nie. U het daarna kennis ontvang dat daar voortgegaan

              word met verstek vonnis. U bewering dat dit in stryd is met ‘n bestaande

              ooreenkoms word verwerp.



              U brief is gedateer 7 April 2004 maar was eers per faks aan ons versend op 13

              April 2004.”




15.   In its answering affidavit the first respondent thus contends that Prinsloo

      was already aware on 1 April 2004 that the first respondent intended to

      seek default judgement, yet he failed to put in an appearance of any kind

      on 13 April 2004.



16.   Prinsloo replied to the letter of 20 April 2004 in a letter dated 22 April

      2004:
                                              12



               “Ons verwys na u faks van 20 deser en verskil drasties met u interpretasie van

               die dokumentasie.



               Ons verneem dat u ten spyte van die koligiale ooreenkomste tog voortgegaan

               het om verstek vonnis en ‘n voorlopige bevel te neem ten spyte van ons skrywes

               en telefoniese boodskappe aan u mnr Liebetrau gelaat.



               Onder die omstandighede versoek ons u om afstand te doen van die bevel

               verkry en toe te stem tot die tersydestelling van die voorlopige sekwestrasie en

               ons geleentheid te bide om die Verweerder se verweerskrif te liasseer. Indien u

               nie tot voormelde toestem nie, het ons instruksies om steeds ‘n formele aansoek

               tot tersydestelling te loods en ook ‘n gepaste kostebevel onder die

               omstandighede aan te vra.



               Ons verneem dringend van u.”




17.   The correspondence concluded with a letter addressed by the first

      respondent’s attorneys to Prinsloo dated 29 April 2004 in the following

      terms:



               “U telefaks van 22 April 2004 verwys.



               Na watter skrywes verwys u. U het een brief vir aandag van skrywer aan ons

               gestuur synde u brief van 7 April 2004 welke op 13 April 2004 om 10h42 per faks

               aan ons versend was.
                                            13

             Skrywer het geen telefoniese boodskappe van u ontvang nie.



             Ons is nie bereid om afstand te doen van die bevel nie.”




18.   It is common cause that the default judgement handed down on 13 April

      2004 was served on Prinsloo on 26 April 2004, more than two weeks

      before the return date reflected in the order of provisional sequestration.

      Nevertheless, there was no appearance on behalf of the applicant or her

      husband on the return day and accordingly a final order of sequestration

      was issued by Botha J on 18 May 2004.



19.   Five months later on 22 October 2004, the applicant filed a notice of

      motion seeking to set aside the default judgement debt as well as the

      provisional and final orders of sequestration. She further seeks

      condonation for the late filing of the rescission application insofar as that

      is necessary. As I have said, the first respondent opposes the application

      as does the intervening creditor, the fifth respondent.



20.   As appears from what has gone before, there are three default

      judgements against the applicant. The application for rescission of the

      judgement debt in the amount of R8 934 975,95 must be brought in terms

      of rule 42, rule 31(2)(b) or in terms of the common law. Rule 42 allows a

      court to rescind judgements erroneously sought or erroneously granted in

      the absence of any party affected thereby, or containing ambiguities,
                                        14


      patent errors or omissions, and those granted as a result of a mistake

      common to the parties. No application has been made in this instance in

      terms of rule 42. Rather, it would seem (it is not stated), the application

      before me is in terms of rule 31(2)(b) which provides that the defendant in

      whose absence a judgement was granted may within 20 days after

      acquiring knowledge of such judgement apply to court upon notice to the

      plaintiff to set aside the judgement and the court may upon good cause

      shown, and upon the defendant furnishing to the plaintiff security for costs,

      set aside the default judgement on such terms as to it seems meet. The

      requirement of “good cause” in rule 31(2)(b) mirrors the requirement of

      “sufficient cause” at common law. This means that the defendant (the

      applicant) must give a reasonable explanation of his default, usually

      requiring that the default not be wilful or reckless; that the application must

      be bona fide and not made with the sole intention of delaying the plaintiff’s

      claim; and the defendant must show that he or she has a bona fide

      defence to the claim. As is well known, the court has a wide discretion in

      evaluating good cause in order to ensure that justice is done between the

      parties.A good defence can compensate for a poor explanation and vice

      versa.



21.   With regard to the applications for rescission of the provisional and final

      orders of sequestration a different standard applies. In terms of section

      149(2) of the Insolvency Act 24 of 1936, the court may rescind or vary any
                                             15


      order made by it under the provisions of the Act. Notwithstanding the fact

      that the section confers a wide power, it is well established that there must

      be some unusual, special or exceptional circumstances in order to justify

      relief under section 149(2). In Abdurahman v Estate Abdurahman 1959(1)

      SA 872 (C) at 873, De Villiers AJ stated :



             “For all these reasons it seems clear that in order to justify the exercise of a

             discretion under section 149(2) the applicant or plaintiff seeking relief from

             insolvency should satisfy the court that his being confined to the normal forms of

             procedure available to him would for some reason be inequitable and not

             desirable - regard being had to his own position, to that of his creditors and to the

             considerations of public interest…”




22.   Thus, it should be kept in mind, an applicant seeking relief from

      insolvency can oppose final relief where an order has been granted

      provisionally, can appeal against the final order and can seek

      rehabilitation. On the other hand, there is no stipulated time period within

      which an application in terms of section 149(2) must be made.



23.   Turning first to the application to rescind the order granting judgement for

      the amount of R8 934 975, 95. In terms of rule 31(2)(b) the applicant was

      required to make application within 20 days of acquiring knowledge of

      the judgement, failing which she requires an order in terms of rule 27(1)

      extending the time period or in terms of rule 27(3) granting her
                                 16


condonation for non-compliance. Here too she is obliged to show good

cause for not making the rescission application timeously or in accordance

with the rules. In her founding affidavit the applicant makes out a case for

condonation or extension of the time period. She claims only to have

become aware of the judgement on 21 May 2004 when the sheriff arrived

at her home to draw up an inventory of her property in pursuance of the

judgement. She states that she then contacted her former husband who

advised her that he had instructed Prinsloo to proceed with a rescission

application. When she heard nothing further, she claims to have begun to

make enquiries about what had transpired. She does not state precisely

when she began to embark upon these enquiries. Her efforts at this point,

so she maintains, were thwarted firstly by the refusal of Prinsloo to

disclose the contents of the files to her because of a dispute with her

former husband about the non-payment of fees, and secondly because

she was not in a financial position to put her current attorney of record in

funds to proceed with the application, in view of the fact that she had

recently divorced and had commenced a new career as an estate agent,

having prior to that being a stay at home mother and housewife. She

obtained the content of the file from Prinsloo eventually on 16 August

2004. Thereafter, she sought to obtain the judgement of Bertelsmann J,

which she acquired on 16 December 2004. The five or six weeks

thereafter were allegedly taken up with drafting papers and acquiring the
                                           17


      declaration. Much of the problem, she states, was the result of Prinsloo

      having been instructed by her former husband and not by her.



24.   I have reservations about the truthfulness of the applicant’s version. It is

      common cause that the order containing the three default judgements was

      served upon Prinsloo on 26 April 2004.                 Its strikes me as highly

      improbable that neither Prinsloo, nor the applicant’s husband, would have

      communicated to the applicant that a judgement in the amount of almost

      R9 million, and a provisional sequestration order had been granted

      against her, especially when Prinsloo needed to determine whether the

      sequestration order ought to be opposed on the return day. My view is

      fortified by Prinsloo’s letter of 22 April 2004 to the first respondent’s

      attorneys that he had instructions to proceed with a rescission application.

      The improbability of the claim that Prinsloo was acting only on behalf of

      the applicant’s husband is confirmed furthermore by the contents of a

      letter addressed by the applicant’s current attorneys of record to Prinsloo

      dated 11 August 2004 in which it was recorded that Prinsloo was acting on

      behalf of the applicant in two matters, one presumably the divorce

      proceedings and the other the insolvency proceedings. The relevant part

      of this letter reads:



             “Ons bevestig dat ons instruksies van ons kliënt, Mev Els, ontvang het ten einde

             hierdie aangeleentheid verder namens haar te voer.      Ons het tans reeds ‘n

             konsultasie met haar belê op Vrydag, 13 Augustus 2004 om 15:00.
                                              18



             Ons plaas verder op rekord dat u aangedui het dat u tans twee lêers namens

             Mev Els hou. U is bereid om die leer ten opsigte van die Aansoek om

             Tersydestelling aan ons beskikbaar te stel, tesame met die relevante inligting

             daartoe.” (my ephasis)




25.   In addition other evidence (discussed more fully below) shows that the

      applicant and her former husband, despite having divorced, remained in

      contact with each other and that he sometimes left some of his

      possessions at the applicant’s home. He also, according to the applicant,

      visited the former marital home regularly to see his daughter. Taking

      into account evidence showing that the applicant’s husband frequently

      used her bank account for business purposes, it seems highly likely that

      he would have kept her abreast of his legal, financial and business affairs

      to the extent that they affected her directly.



26.   But even were I to accept that the applicant acquired knowledge of the

      judgement only on 21 May 2004, as she claims, she nonetheless still

      delayed another five months. Moreover, in correspondence addressed by

      her attorneys of record to the second respondent dated 25 August 2004

      there are indications that the applicant had acquiesced in the

      sequestration orders, and hence the judgement debt. This letter reads:



             “We refer to the above matter.
                                                19

               We wish to confirm that Mrs Els has approached us in order to act on her behalf.
                                                                     th
               She has also handed to us your letter dated the 17 of August 2004.



               It is our instructions that it was never our client’s intention in order not to provide

               a statement of affairs.    It is to our knowledge that our client has ended the

               mandate of her previous attorney Werner Prinsloo Attorneys. According to our

               client Mr Prinsloo dealt with all the relevant matters necessary. Our client is at

               this stage not sure whether she has already provided Mr Prinsloo with her

               statement of affairs.

               If you have a specific form that has to be completed by our client, our client

           indicates that she will complete same. In the absence of the aforementioned you

               are requested to          provide us with an indication as to what information you

           request from our client.”




27.   No reference is made to any instructions to apply for rescission of the

      sequestration order or the judgement debt in this letter.



28.   The applicant’s claim to have been without funds is equally doubtful. Her

      bank account statements for the period April to May 2004 reflect varying

      balances between R11400 and R31400. Moreover, any difficulty she

      might have had in obtaining information from Prinsloo could have been

      explained in a supporting affidavit and appropriate relief sought from the

      court.



29.   Accordingly, I am not persuaded that the applicant has made out a proper

      case, or has shown good cause, in terms of rule 27(1) or rule 27(3)
                                        20


      entitling her either to an extension of the time period in rule 31(2)(b) or for

      condonation. It would follow therefore that the judgement in the amount of

      R8 934 975,95 against the applicant should stand and in the light of her

      own evidence about her financial circumstances she would be factually

      insolvent and hence no purpose would be served in rescinding the

      sequestration orders.



30.   Nevertheless, for the sake of completeness, and in the interests of justice,

      I am prepared to consider whether the applicant has met the requirements

      for rescission in terms of the common law and/or section 149(2) of the

      Insolvency Act.

31.   In order to show good cause the applicant should give a reasonable

      explanation for her default. It is permissible to have regard not only to the

      reasons for the failure to file a plea but also to the applicant’s dilatory

      approach subsequent to judgement, aspects of which I have already

      canvassed when discussing condonation.



32.   The applicant’s explanations for failing to file a plea or to oppose the

      application for default judgement are unconvincing. She claims, in effect,

      that an oral agreement was entered into between the first respondent’s

      attorneys and Prinsloo that the matter would be held over until the first

      respondent gave express instructions to proceed with the matter, in which

      case Prinsloo would be notified to file a plea. This submission simply does
                                  21


not square with the correspondence.        The respondent’s attorneys had

already served a notice of bar some months before. At best for the

applicant, the respondent merely indicated that it would seek further

instructions. Even then, it made it plain that it did not think the settlement

proposals would be acceptable. Besides that, once the application for

default judgement was served upon Prinsloo it was abundantly clear that

the first respondent intended to proceed to obtain judgement. Prinsloo

was apprised of the fact that the matter had initially been set down for

default judgement on 6 April 2004 and participated in the discussions

leading to the matter being postponed until 13 April 2004. Despite that,

neither he, nor the applicant or her husband made any appearance. They

had no reason to assume that the application for default judgement would

not be proceeded with. Added to that, as I have already indicated, it was

common cause that the provisional order of sequestration was served

upon Prinsloo on 26 April 2004, three weeks before the return date. Such

notwithstanding, neither the applicant, her husband, nor Prinsloo put in

any appearance on the return date. No persuasive explanation has been

offered for their failure to do so. The applicant, we have seen, claims to

have become aware of the order only on 21 May 2004. This, as I have

said, is unconvincing and highly improbable. Any neglect by Prinsloo to

communicate to the applicant the fact of her provisional sequestration

would be a serious breach of duty. The applicant’s failure to allege as

much in her founding papers is a further indication that such probably did
                                       22


      not in fact occur. In any event, it is common cause that Prinsloo knew of

      the application for default judgement, the default judgement and the

      provisional sequestration. This knowledge should be imputed to the

      applicant, especially when the evidence overall confirms that he was

      acting on her behalf in the divorce and insolvency proceedings. Prinsloo’s

      neglect to file a plea, his failure to make an appearance or to put

      information before the court in the default judgement application and his

      failure to make an appearance on the return date are all instances of wilful

      or reckless default. In the premises, and in view of the lackadaisical

      approach taken after judgement was given, I am compelled to the

      conclusion that no reasonable explanation has been offered for the

      applicant’s default.



33.   Much time and effort were spent in argument on the question of whether

      the application for rescission was bona fide and not made with the sole

      intention of delaying the first respondent’s claims. The first respondent

      placed emphasis on the timing and the manner of the divorce

      between the applicant and her husband, as well as certain financial

      transactions reflected in the applicant’s bank statements, to advance the

      proposition that the divorce was a sham deployed in the hope of the

      applicant being placed thereby in a position to avoid or mitigate the

      consequences of a declaration of insolvency. It argued that the manner in

      which the divorce was concluded reveals either an attempt at concealment
                                         23


      or a deliberate strategy of illegitimate avoidance, even if ham-handed and

      unlikely to yield the desired result.



34.   As I have mentioned, the divorce was granted on the same day as the

      notice of bar after the failure to file a plea to the declaration. As such, the

      timing certainly raises a suspicion that it may have been a divorce of

      convenience. In her founding affidavit the applicant positively avers that

      the joint estate had been divided as a result of the divorce on 12

      December 2003, that the basis of any liability on her part in terms of the

      declaration filed on 3 October 2003 therefore no longer applied, and

      hence that the provisional sequestration of the joint estate on 13 April

      2004 was not competent because at that date the joint estate no longer

      existed.



35.   The divorce summons was issued on 7 November 2003, about a month

      after the filing of the declaration. The summons reflects the applicant’s

      attorney to be MC van den Berg Attorneys of Centurion, whereas the

      court file and divorce order reflect the pigeon-hole number allocated by the

      Registrar to Werner Prinsloo Attorneys. After making enquiries about this

      apparent anomaly, the first respondent received a letter from MC van den

      Berg dated 15 November 2004 in which he explained:



             “INSOLVENTE BOEDEL C F & T M ELS
                                          24

             U skrywe gedateer 5 November 2004 verwys.



             Ons het instruksie ontvang vanaf mnre Werner Prinsloo Prokureurs om namens

             hulle as korrespondente in hierdie aangeleentheid op te tree.   Kort nadat

             dagvaardiging uitgereik is, het laasgenoemde prokureurs die aangeleentheid

             weer terug geneem. Betaling het nooit aan ons plaasgevind nie, maar wel aan

             mnre Werner Prinsloo Prokureurs.”




36.   It is indeed unusual for a Pretoria attorney to appoint another Pretoria

      based attorney as a correspondent. The applicant and Prinsloo explained

      that van den Berg’s services were used because Prinsloo thought it

      undesirable to act on behalf of both the applicant and her husband.

      Despite the terms of the divorce and settlement agreement having been

      agreed between the parties, Prinsloo considered it prudent to bring in

      van den Berg.      Nevertheless, he drafted the particulars of claim and

      personally took them to van den Berg who signed them. After signing the

      particulars van den Berg then convinced Prinsloo that it would not be

      unethical for him to act on behalf of both the applicant and her husband.

      With that, Prinsloo took his file back and finalised the divorce proceedings.

      The difficulty one has in accepting such an explanation arises from van

      den Berg’s initial description of his role as that of correspondent and the

      fact that Prinsloo did not reinstate himself as attorney of record by himself

      signing the particulars of claim before issuing them. Having consciously

      accepted van den Berg’s advice that it was ethical to act as the applicant’s

      attorney of record, he nevertheless went ahead and immediately issued
                                        25


      the summons signed by van den Berg. As for van den Berg’s use of the

      term “correspondent”, Prinsloo stated that he never intended to instruct

      van den Berg as a correspondent, while both the applicant and van den

      Berg attempt to explain away the usage of the term “correspondent” as “n

      swak woord keuse”.



37.   The first respondent submits that this unusual chain of events, and the

      improbable explanation for them, point rather to an attempt to create the

      impression of an arms-length divorce with a view to suppressing any

      suspicion of collusion. As will become evident presently, other facts tend

      to support this interpretation.



38.   The applicant maintains that the true reason for the divorce was her

      husband’s infidelity. She avers that at about the same time as the launch

      of the sequestration proceedings she became aware of her husband’s

      extra marital affair with another woman, who she fails to identify. She

      then consulted with another attorney, Mr van Strijp of Ermelo in that

      regard. Van Strijp has filed a supporting affidavit confirming the

      applicant’s instructions to him that the reason advanced for the divorce

      was in fact her husband’s infidelity. I would have been inclined to accept

      her version more readily on this delicate question were it not for the fact

      that the particulars of claim in the divorce action make no mention of the

      adultery as a contributing cause to the breakdown of the marriage. It was
                                            26


      incumbent on the applicant in the divorce proceedings to make a frank

      and full disclosure to the court of the true reasons for the divorce. Her

      failure to do so must redound negatively on her credibility.



39.   Moreover, the settlement agreement made an order of court in the divorce

      proceedings misrepresents the true factual and legal position with regard

      to the parties’ immovable property. Clause 3 of the settlement

      agreement reads:



             “VERDELING VAN BATES

             3.1     Onroerende eiendom

             3.1.1   Die eiendom geleë te Fouriestraat 80, Ermelo, word aan die eiser

                     toegeken as haar uitsluilike eiendom;

             3.1.2   Eiseres aanvaar verantwoordelikheid vir die huidige uitstaande verband;

             3.1.3   Eiseres sal toesien dat die nodige registrasie van die verweerder se

                     onverdeelde halwe aandeel op eiseres se naam geskied;

             3.1.4   Die eiendom bekend as Bihrmanstraat 1a, Ermelo, sal so spoedig

                     moontlik deur die partye verkoop word en die netto-opbrengs daarvan

                     sal aan die verweerder toegeken word as sy uitsluitlike eiendom.



             3.2     Roerende bates

                     Die roerende bates is reeds onderling tussen die partye verdeel en elke

                     party   behou die bates tans in sy of haar besit as sy of haar uitsluitlike

                     eiendom”
                                           27


40.   The first respondent in its answering affidavit drew attention to the fact that

      clause 3.1.4 of the settlement agreement was inaccurate in that a sale

      agreement in respect of the property mentioned in that clause had

      already been concluded on 23 October 2003, almost two months before

      the divorce was granted and that the proceeds of the sale were not in fact

      paid to the applicant’s husband but instead to Mrs Theresa Potgieter, the

      wife of one of his acquaintances.          The first respondent acquired this

      knowledge from testimony given by the applicant’s husband during an

      insolvency enquiry conducted in terms of the Insolvency Act, where he

      testified that the property had been transferred into his name because

      Potgieter at the time of purchase had been an unrehabilitated insolvent.

      Potgieter paid the deposit and monthly bond repayments. The applicant

      confirms this to be the true situation with regard to the property in

      question. Her explanation for the untrue account of it in the settlement

      agreement offers some insight into her less than ethical nature.                In

      paragraph 11.1 of her replying affidavit she states:



             “11.1   Die skikkingsooreenkoms deel met die vaste eiendomme wat in die

                     gemeenskaplike boedel was op datum van skikking, synde die

             Birmanstraat-    eiendom en die Fouriestraat-eiendom.     Die rede waarom

             klousule 3 met die      Birmanstraat-eiendom deel soos daarin vervat, is dat

             iets oor die betrokke   eiendom in die skikkingsakte gesë moet word en die

             eiendom uit die gemeenskaplike boedel getransporteer moet word. Dit was te

             alle relevante tye      gemeensaak tussen myself en my gewese eggenote dat

             die betrokke eiendom nie       aan die gemeenskaplike boedel behoort nie,
                                               28

              maar die eindom is van die        Potgieter-gesin.     Ons het toe besluit om te

              notuleer dat die eiendom so spoedig       moontlik verkoop word, aangesien daar

              ‘n koopooreenkoms gesluit was gedurende Oktober en is dit genotuleer dat die

              opbrengs na my gewese eggenoot            sou gaan. Dit was deurgaans ook die

              bedoeling dat hierdie gelde aan Mev.      Potgieter    oorbetaal sou   word.     ‘n

              Verdere rede was dat die verband oor die             betrokke eiendom nie deur my

              gedelg wou kon word nie en dat my gewese             eggenoot                   die

              verantwoordelikheid daarvoor sou neem en dan vir dieselfde rede            ook die

              eiendom in sy naam moes registreer totdat dit eendag verkoop kon word en        die

              opbrengs aan Potgieter betaal sou word.                Ek moes die Fouriestraat-

                       eiendom oorneem, asook die verband daarop. Die doel daarvan was

              ook dat ek         behuising kon kry en moontlik huurinkomste uit die verhuring van

              kamers van         die Fouriestraat-eiendom.   Dit sou my ook behulpsaam wees

              met die betaling          van die verband oor die betrokke eiendom.”

41.   She goes on to deny that there was any intention to create an impression

      that the divorce was at arms-length by reflecting an apparent equal

      division of the assets. What evidently escapes her, and which surely must

      count against the credibility and reliability of her version, is that she and

      her husband gave a false account of their assets to this court during the

      divorce proceedings. The explanation put forward in her replying affidavit

      amounts to an admission, without any evident sign of regret, that she and

      her husband misled the court by failing to disclose fully the true state of

      their affairs.



42.   During May 2004, some six months after the divorce, Mr Eugene Nel, an

      attorney in the employ of the first respondent’s attorneys visited the
                                       29


      applicant at her home in Ermelo in order to draw up an inventory of

      assets. Together with the Deputy-Sheriff he came upon a room in the

      applicant’s house which appeared to be used as an office in which he

      found documents relating to the husband’s business dealings, his

      briefcase containing his passport and chequebook, as well as personal

      records of the applicant. The applicant in reply has countered that the

      room is nothing more than a study used by her and her minor daughter.

      She explained that the briefcase and documents belonging to her husband

      had been left by him after he had visited his minor daughter before leaving

      for Durban on a golfing trip. She disputes therefore the inference sought

      to be drawn by the first respondent that despite the divorce the applicant

      and her husband continue to live and conduct business together.



43.   Although the applicant fails to deny all of Nel’s allegations, including the

      allegation that the computer contained records of the husband’s business

      or that the servants informed Nel that neither the applicant nor her

      husband were at home, this evidence, besides in some respects being

      hearsay, raises a dispute of fact that cannot be resolved on the

      papers. However, the resolution of the dispute of fact is not necessary for

      the determination of the application and the evidence ought accordingly to

      be left out of reckoning.
                                       30


44.   A review of the transactions recorded in a number of the applicant’s bank

      statements support the conclusion that the applicant has been less than

      forthright under oath about the nature and purpose of her financial

      dealings. In paragraphs 11 and 12 of her founding affidavit the applicant

      states that she at no stage participated in the activities of her

      husband’s business, as conducted through D&F Chemicals CC, and that

      she had never been gainfully employed for the duration of her marriage.

      The first respondent maintains that her bank accounts tell a different story.

      It has produced some of the applicant’s current account bank statements

      for the period June 2002 - May 2004.           From them it is clear that

      substantial deposits and withdrawals were made, suggesting that the

      account was used for purposes other than running the household.



45.   The applicant has provided an account of certain of the transactions,

      amounting in some instances to a concession in effect that the account

      was used for business purposes. Her explanation for a deposit of R160

      000 in November 2002 was that her husband needed to purchase raw

      materials for fertiliser and that the money was transferred from their bond

      account to her account for that purpose. It is not clear why the transfer

      was not made directly to her husband’s account or to that of D&F

      Chemicals CC. Other transactions requiring clarification have not been

      explained. Thus, there is no account of a cash deposit of R62 000 effected
                                        31


      on 14 February 2004, shortly after the divorce. Likewise, she tenders no

      explanation for a cash deposit of R10 450 on 9 March 2004.



46.   The bank statements thus point to two legitimate conclusions. Firstly, the

      applicant’s bank account, on her own admission, was used to conduct part

      of the business of her husband and D&F Chemicals CC. Secondly,

      substantial cash deposits were made into her account subsequent to the

      divorce, giving the lie to her claim that she was not involved in her

      husband’s dealings and that she was financially strapped. Her failure to

      play open cards supports the first respondent’s allegation that she is not

      bona fide.

47.   The applicant’s propensity for mis-statement is further borne out in her

      accounting for the maintenance paid to her by her husband. In terms of

      the divorce settlement the applicant is entitled to maintenance in the

      monthly amount of R18 000. In paragraph 11 of her founding affidavit she

      declares that in the relevant period her husband had only paid her R10

      000 per month and such was insufficient for her needs. In her replying

      affidavit she stands by the assertion, qualifying it slightly with a claim that

      approximately R10 000 per month was paid. Yet this is contradicted by the

      schedules annexed to her replying affidavit explaining various transactions

      in her bank account. In November 2003 she received R17 000

      maintenance, as well as an additional R5000 as a contribution to joint

      household expenses. In December 2003 she received R18 000 together
                                       32


      with an additional R6 500 contribution to the costs of the divorce and

      relocation to another home. In January, February, April and May 2004

      she received R17 000.     These payments thus do not accord with her

      averment in the founding affidavit to the effect that she received R10 000

      per month. This too casts a shadow over her credibility and good faith.



48.   In the light of the foregoing, I am of the view that the application for

      rescission has not been made bona fide. The manner in which the divorce

      action was conducted, the failure to inform the divorce court of the

      pending sequestration proceedings, the role played by Prinsloo, the non-

      disclosure of the true reasons for the alleged breakdown of the marriage in

      the particulars of claim, the inaccurate accounting for the immovable

      property in the settlement agreement, the mis-statements, and the

      unsatisfactory or incomplete accounting for the transactions reflected in

      the applicant’s bank accounts, individually and cumulatively, point to an

      absence of bona fides and an intention to delay the first respondent’s

      claims.



49.   Moreover, the surrounding circumstances indicate that the decision to

      bring the rescission application may only have eventuated in response to

      the applicant being subpoenaed to appear before an insolvency enquiry.

      As discussed above, correspondence from the applicant’s attorneys in

      August 2004 suggested that the applicant had acquiesced in the
                                         33


      judgements. When subpoenaed to appear before the insolvency enquiry

      the applicant sought and obtained a postponement in order to secure legal

      representation.    The postponement was granted and the inquiry was

      rescheduled for 27 October 2004.         Five days before she was due to

      appear, on 22 October 2004, the applicant filed this application.           Her

      conduct in this respect, detracts not only from the reasonableness of the

      explanation for her default, but also undermines any assertion of bona

      fides.



50.   As for the existence or otherwise of a bona fide defence, the applicant

      need only establish this prima facie. It is sufficient to set out facts   which,

      if established at the trial, would constitute a good defence. She need not

      deal fully with the merits. On this point, therefore, I tend to agree with

      counsel for the applicant that the referral of the dispute to trial by

      Bertelsmann J of itself establishes prima facie the existence of a bona fide

      defence.    However, the applicant would have done better to have

      disclosed the defence more specifically in her founding affidavit by dealing

      with the allegations making up the cause of action in the declaration or by

      filing a draft plea, something she has singularly failed to do. In the result,

      it might legitimately be argued that she has furnished no clear or

      convincing basis for why she should not be held liable at least for half of

      the R9 million debt.
                                        34


51.   But even giving her the benefit of the doubt that the referral to trial is

      sufficient, the existence of a bona fide defence in and of itself is self-

      evidently not sufficient or good cause to grant rescission, especially in

      view of my findings regarding condonation, the absence of a reasonable

      explanation for her default and the lack of bona fides. Accordingly, I am

      not prepared to rescind the order declaring the applicant jointly and

      severally liable for the payment of the amount of R8 934 975, 95.



52.   Likewise, I am not persuaded that exceptional circumstances exist

      justifying the rescission of the provisional and final sequestration orders.

      Counsel for the applicant submitted that the failure to serve the rule nisi

      upon the applicant personally, the existence of factual disputes justifying a

      referral to trial, the dissolution of the joint estate by divorce, and the

      inappropriateness of the ordinary remedies of appeal and rehabilitation

      are all exceptional circumstances justifying the rescission of the

      sequestration order under section 149(2) of the Insolvency Act. I do not

      agree for the reasons already dealt with in my discussion of the

      application for the rescission of the judgement debt. Firstly, I reject, on the

      probabilities, the submission that the applicant was unaware of the default

      judgement of 13 April 2004 until after the grant of the final order.

      Secondly, although the joint estate no longer existed at the time of the

      provisional sequestration order, both the applicant and her husband were

      cited separately as parties, with the consequent effect of the orders being
                                         35


      that both were individually sequestrated. Spouses who were married in

      community of property remain liable for debts incurred by a former spouse

      during the subsistence of the marriage - see generally BP Southern Africa

      (Pty)Ltd v Viljoen en ‘n Ander 2002 (5) SA 630 (O). The failure by the

      applicant or her attorney to disclose to the court during the divorce

      proceedings that insolvency proceedings were pending, as well as the

      failure to disclose the divorce to the first respondent’s attorney at the time

      that default judgement was obtained, cannot, in my opinion, constitute

      exceptional circumstances of which the applicant should now have the

      benefit. If anything, they serve merely to justify a variation of the order to

      effect a sequestration of her individual estate, something this court is

      entitled to do mero motu in terms of rule 42.



53.   In view of my refusal to grant rescission, there is no need to determine the

      intervening creditor’s application for sequestration under case number

      16876/05, which as a consequence of my decision will fall away.

      However, being compelled by the rescission application to launch the

      application for intervention and the sequestration application based on its

      claim against the applicant, I am persuaded that the intervening creditor is

      entitled to the costs of both applications.



55.   In the premises, I make the following orders:
                                           36


              a).     The application for rescission under case number 20905/03

                      is dismissed.



              b).     The order of Botha J under case number 20905/03 dated 18

                      May 2004 is hereby varied in terms of 42 to read as follows:



                             “Word Gelas: dat die onderskeie boedels van

                             Conraad Frederik Els en Tersia Matilda Els hierby

                             gesekwestreer       word     te    behoewe       van    die

                             skuldeiesers, soos versoek.”

              c.)     The applicant is ordered to pay the costs of the application,

                      such costs to include the costs of the applications of the

                      intervening creditor under case number 16876/05, including

                      the costs reserved in respect of all previous appearances.




J MURPHY
JUDGE OF THE HIGH COURT

                                                                   st
Counsel for the applicant Adv S Guldenpfennig, Pretoria, counsel for 1 respondent, Adv MC
                                       th
Erasmus, Pretoria and counsel for the 5 Respondent, Adv G Lotz, Pietermaritzburg.
                                              37


                                                               st
Attorney for the applicant RNB Attorneys, Pretoria, attorney for 1 Respondent, Van Zyl, Le Roux
                                           th
& Hurter, Pretoria and attorney for the 5 Respondent, Geyser, Du Toit, Louw & Kitching,
Pietermaritzburg.

								
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